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5 Things UAE Investors Should Know About UK Property Tax

Financial Performance

Despite politics dominating the headlines, evidence shows that the UK remains a leading international investment target – particularly for investors from the UAE. While we’ve identified everything that UAE investors need to know about financing UK property, below we round up the five things UAE Investors should know about UK property tax before they make any property investment. 

Stamp Duty Land Tax

Perhaps the most common query for international investors is Stamp Duty Land Tax (SDLT), a fee unique to the UK and applicable to all property purchases over a certain price, whether from a domestic or international investors. It’s measured in ‘bands’, starting at 2% for properties worth between £125k and £250k before increasing.

Additional properties can apply to anything from a second home to multiple properties purchased for Buy-to-Let (BTL) purposes. The 3% levy on additional properties was introduced in April 2016.

Non-Resident Landlord Scheme

Overseas investors are required to register to pay income tax under the Non-Resident Landlord Scheme. A non-residential landlord only pays income tax on rental profits in the UK, rather than paying the tax in the country they’re based. This avoids double taxation and only applies to investors that live outside of the UK for at least six months. In any partnership, each person is a separate landlord.

Capital Gains Tax

Capital Gains Tax (CGT) is paid on the disposal of a property and calculated by subtracting the sale value from the original purchase value to find the ‘total gain’. Changes to the rules for British expats and non-resident property owners in 2015 mean the following applies:

If you’re a UK expat, non-UK resident individual or a non-resident partnership, company or trust that owns UK property, you pay CGT on the sale of a property. Previous rules stated that as long as you’d been a non-UK resident for five consecutive tax years, you were exempt from CGT.

Inheritance Tax

Inheritance Tax (IHT) is based on your ‘country of domicile’ rather than your residency status. This makes the rules slightly different, particularly for UK expats. If you were born or raised in the UK, it’s likely that you’ll be UK domiciled for inheritance purposes. This means that HMRC can apply the tax to your global assets at a rate of 40% if your estate is worth over £325,000.

Income Tax

Probably one of the most common occurrences out of our 5 things UAE Investors should know about UK property tax, income tax is vital to consider. Any owner of UK rental property living in the UAE is obliged to register for UK taxes whether it needs to be paid or not. UAE citizens living outside of the UK are taxed in the UK at 20% of their profit, until the total income hits £34,500 – at this point the higher-rate applies.

For British citizens living in the UAE, a ‘personal allowance’ is applied that means the first £11,850 of profit from rental may be tax-free while profits between £11,850 and £46,350 are taxed at 20%. Higher rates apply in excess of £46,350.

It’s always advised to speak to a financial advisor before you progress through your investment, so you’re aware of the issues you may face down the line. 

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